While “promises” and “contracts” may seem like distinctions without a difference to non-lawyers, civil litigators know better than to conflate the two. Nevertheless, as explained in a recent decision of the New Jersey Supreme Court, simply because a “promise” is not a “contract” does not necessarily mean recovery of damages is not possible.
In its February 18, 2021 decision, Jed Goldfarb v. David Solimine, No. A-24-19 (083256), 2021 WL 626991 (N.J. 2021), the New Jersey Supreme Court analyzed whether the plaintiff, Jed Goldfarb, could recover against the defendant, David Solimine, based on the defendant reneging on a promise of employment after the plaintiff quit his job to accept the promised position. The plaintiff argued that although an employment agreement was never reduced to writing, he received specific promises of a base salary and return on investments in exchange for providing in-house management of the defendant’s family’s investment portfolio. In response, the defendant asserted that New Jersey’s Uniform Securities Law of 1997, N.J.S.A. 49:3-47 to -89, forbids the enforcement of an investment advisory contract that has not been reduced to writing. While the Court agreed that a suit based on the oral employment agreement that the defendant dishonored would be barred under the Act, the promise on which the plaintiff relied in quitting his prior employment did not fall within the scope of “the contract” under the Act. Rather, the broken promise was actionable as a promissory estoppel claim—a claim not based on a contract, but which allowed for the recovery of damages nevertheless.
The Court reasoned:
Suits to enforce contracts and suits predicated upon promissory estoppel are . . . different in both their requisite elements and their goals. To prevail on a claim of breach of contract, a party must show that a contract has been made, with an offer, acceptance, and consideration all present, and that the moving party has performed or is excused from performing. If a party prevails on this claim, the party is entitled to expectation damages in order to recover the benefit of its bargain. Promissory estoppel, on the other hand, requires that a promise has been made, that the promise was made with the expectation it be relied upon, that the moving party reasonably relied on the promise, and that the promisee incurred a detriment due to that reliance when the promisor broke the promise. If a promisee proves those elements of a promissory estoppel claim, the promisee may be awarded reliance damages so as to restore him or her to the position he or she was in before the parties met. . . . Considering the distinctions between the two forms of claims, we conclude that Goldfarb’s claim of promissory estoppel is not a “suit based on the contract.” It is instead a suit based on his reasonable reliance, to his detriment, on Solimine’s promise of a job.
Seeming to recognize the potential challenges in determining whether a “promise” is a “contract,” the Court offered the following guidance:
The distinction can perhaps most readily be understood through the distinct types of recovery at issue. Benefit-of-the-bargain or expectation damages look forward. Here, they would look ahead to what plaintiff would have earned if he had worked for defendant, and they would grant him recovery based on that projected employment. . . . Plaintiff is not entitled to benefit-of-the-bargain damages from the unachieved investment employment position.
But he is entitled to seek reliance damages. Reliance damages look backward. Here, they would look back to determine what losses plaintiff suffered as a result of his relying on defendant’s later-broken promise — what he would have earned had he not quit his job to work for defendant.
Thus, the Supreme Court affirmed the judgment of the Appellate Division upholding the jury’s finding of liability against the defendant on the promissory estoppel claim and remanding the matter for a new trial to assess the plaintiff’s reliance damages only. Justice Albin filed a dissenting opinion, asserting that the Securities Law’s writing requirement cannot be evaded by a suit in either law or equity.
The Court’s decision serves as a helpful reminder that promises—especially in the employment and commercial contexts—should not be made lightly. When a promise is broken, although a contract may not exist, entitlement to damages may.